0

Why ExxonMobil Has Lagged Behind Chevron and the Dow Jones Industrials in 2013

Energy giant Dow component ExxonMobil (NYSE: XOM) has had a fairly good 2013, with gains of 11% this year. But compared both to the 23% gain for the Dow Jones Industrials (DJINDICES: ^DJI) and the 17% jump in shares of rival Chevron (NYSE: CVX) , Exxon's returns don't look all that impressive, and the oil giant still has something to prove to investors that it can deliver leading returns even with its massive size.

Exxon faces the same challenge that many big oil companies have had to deal with lately: finding ways to replace falling production from aging wells with new sources of oil and gas around the world. Even with monumental discoveries in unconventional plays like ultra-deepwater drilling and shale oil and gas formations, Exxon and its peers have to maintain the pace of capital investments in order to keep up with the rate of depletion of its legacy assets. Can Exxon keep up with Chevron and its other industry rivals? Let's take a closer look at what moved shares of ExxonMobil in 2013.

Why hasn't ExxonMobil stock done better in 2013?As you can see above, ExxonMobil has struggled for most of the year. Without a sizable rebound in just the past couple of months, Exxon might have threatened to be one of the Dow's few losers for the year, and it has consistently failed to match up to Chevron's performance.

One big headwind against Exxon has come from its not being ideally positioned to take advantage of some of the most favorable opportunities in energy lately. For instance, even as U.S. oil and gas production has skyrocketed, Exxon still gets most of its production from international sources. That has made it challenging for Exxon to find enough good projects to sustain its output, something that Chevron has managed to do more successfully and on a more consistent basis.

Yet Exxon has delivered some positive surprises more recently. In its most recent quarter, the company managed to boost production by 1.5%, topping investors' expectations and reversing year-ago drops in production levels. Even though overall revenue and income fell, Exxon enjoyed sizable earnings gains from its upstream segment, partially offsetting weakness in the downstream refinery business as some of the pricing factors that had previous helped refining operations be extremely profitable began to fade somewhat.

Still, Exxon, Chevron, and many other oil and gas companies haven't been happy to see oil prices stagnate and even head lower recently. In particular, West Texas Intermediate breaking under $100 per barrel has had a painful impact on revenue and earnings throughout the industry. Yet the increasing spreads between WTI and overseas Brent crude prices could help Exxon's refinery operations turn around in the current quarter. That shows some of the benefits of Exxon having decided to remain an integrated energy company, rather than spinning off its refinery operations as many of its peers have done in the past few years.

ExxonMobil's future is still uncertain. Although it has taken strides recently to bolster its production and try to make the most of a tough price environment, Exxon really needs to see oil climb back above $100 per barrel in order to make the most of its current opportunities. Otherwise, it will have to find new discoveries at a much faster pace than it has accomplished in the past if it wants to have any chance of sustaining its revenue over the long run.

Make you portfolio more energeticExxon hasn't been the best energy play in the market, and you deserve the best stocks you can find. That's because picking the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, The Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.

Click here to add ExxonMobil to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Sending report...

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
Follow @DanCaplinger